Powell takes wait and see approach on interest rates —
drawing angry response from Trump
Alex Kimani

No hurry to cut rates unless labor market weakens or inflation pressures abate, Fed chair says

The Federal Reserve on Wednesday moved to the sidelines, signaling that it wasn’t likely to change interest rates again until there is greater clarity on how President Donald Trump’s economic plans will affect inflation and the labor market.

The Fed is likely to find “a number of creative ways to say ‘wait and see,’” said Lou Crandall, chief economist at Wrightson ICAP.

There is so much uncertainty over potential tariffs and fiscal policy that “keeping things steady looks like the prudent move,” said Tom Simons, an economist with Jefferies.

In his press conference, Fed Chair Jerome Powell said there was “no hurry” for the Fed to move, but that signs of a weaker job market or good inflation news might get the central bank off the fence sooner.

At the end of their two-day meeting, Fed officials voted unanimously to leave the benchmark interest rate unchanged, ending a run of three consecutive meetings with rate cuts.

In a statement, the Fed repeated language implying that interest-rate increases could be on hold for an extended period.

“The economic outlook is uncertain,” Fed officials said, promising to keep an eye out for signs of both higher inflation and a weaker job market.

The Fed decision will leave rates in the range of 4.25% to 4.5%.

Trump weighed in with a statement following the meeting, writing on his social-media network that Powell and the Fed “failed to stop the problem they created with inflation.” Trump, who appointed Powell but has been critical of the Fed chairman, doubled down in the same message on campaign promises such as ramping up energy production and “reigniting American manufacturing.”

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The central bank didn’t update its economic forecast. In December, officials penciled in two quarter-point cuts in 2025 — more hawkish than the market had expected.

Fed officials are also uncertain about how much of an impact their existing policy stance is having on the economy.

Powell has said that the policy is restrictive, or holding down growth, but many economists aren’t so sure.

But the market has adopted the Fed’s view, with many economists seeing the first cut in June.

In the world of economists and interest rates, however, that’s essentially so far away that anything could happen.

One top official, Fed governor Christopher Waller, has said the Fed might be able to cut rates by more than expected if inflation eases.

Some economists agree, saying that the inflation storm has passed.

On the other hand, some economists think that the Fed will not be able to cut rates again and that Trump’s policies on immigration and tariffs will make the Fed’s job harder as it seeks to get back to its 2% inflation target.

 

 

 

 

 

Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000.

 

 

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